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Opposition parties have raised their objection to the 1% increase in VAT, which they blame the ANC for allowing.
On Tuesday the National Assembly debated the tax administration laws amendment bill which was passed, although the Democratic Alliance, the United Democratic Movement, the Economic Freedom Fighters, the African Christian Democratic Party and the Inkatha Freedom Party objected to it.
Opening the debate ANC MP Thandi Tobias addressed the "elephant in the room", VAT. Tobias said that the increase will be reviewed in three years, and that it is not all "doom and gloom" as suggested by opposition parties.
Democratic Alliance MP David Maynier raised the party's objection to the VAT increase as it would make life harder for the poor. "We must fight those who fight poor," he said. He called for Finance Minister Tito Mboweni to "get a grip" and act like a finance minister capable of dealing with the economic crisis.
Economic Freedom Fighters MP Mbuyiseni Ndlozi pointed out that the VAT hike has had a negative impact on the overall standard of living. He called for government instead to address issues of revenue collection from well-capitalised companies which have the ability to claim VAT refunds, and who engage in tax avoidance and illegal tax activities.
Ndlozi said that taxation will not eradicate poverty, but rather reforms to monetary policy, the establishment of a sovereign wealth fund, and the leveraging of the Public Investment Corporation's assets to inject cash into infant industries, as well as a state bank are necessary to address poverty.
Blame the ANC
Inkatha Freedom Party MP Mkhuleko Hlengwa called the VAT hike "unforgivable", and said taxpayers were being punished for the South African Revenue Services deterioration in collecting revenue.
He said that the shortfall was brought about by the ANC, as their "compromised members" could not stop themselves from "enjoying the public purse".
"Tax increase was brought by the ANC, petrol increases was brought by the ANC, bailouts was brought by the ANC and corruption was brought by the ANC," he said.
Steve Swart of the African Christian Democratic Party also blamed the ANC for failing to hold SARS to account to collecting revenue efficiently. As a result VAT and other taxes had to be raised, he told the National Assembly.
He called on government to take responsibility for what was happening now - instead of waiting three years to review the VAT hike.
ANC MP and chairperson of the Standing Committee of Finance Yunus Carrim responded to criticisms directed at the ANC. He said the committee did not embrace the VAT increase enthusiastically.
"Think of it at the eve of an election - which ruling party will increase VAT on the eve of election?" he said. "It was done because there was no other choice."
Carrim said the committee and Treasury were aware of the widespread opposition to VAT. Never had a proposal of tax measures been met with "widespread and intense opposition," he said. Carrim reiterated once the economy improves, after three years government will review the hike.
Fee-free higher education
Mboweni said the VAT hike was necessary given the fee-free higher education – a large expenditure item – which was introduced. "We needed revenue to fund it," he said.
"If you do not understand the inter-relationship, then we will have a difficult conversation."
The minister said less taxation and higher expenditure do not go together. "It is important to see the interrelationships of these issues," he said.
"We are handling these matters against a backdrop of slower economic performance, higher debt to GDP ratios and increasing demands to society," the minister said.
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